The thought of buying a new car can be really exciting but New Car Financing might not be the best choice when it comes to a new Auto Loan. Financing a Pre-Owned automobile might be the better choice.
We admit that new cars are great. There is the new car smell, the latest in design and technology, no miles on the odometer, and the peace of mind that comes with knowing you are the first person to own the car. But that’s not to say buying new is always the right way to go.
The age old new car vs. used car debate is one that every buyer has had to face. There is no universally correct answer. What’s right all depends on your needs, wants, budget and more.
In the end though, for most people, it really comes down to money. And from that point of view, buying used usually represents the better value.
Reasons you should Not Finance a New Vehicle
Here are just a few reasons why you shouldn’t finance a new car.
1. Higher Price Tag
This one falls into the “obvious” category, but a new car will be more expensive than an older version of the same car.
2. Higher Insurance Premiums
New cars tend to come with higher insurance premiums than used cars, which shouldn’t come as a surprise because they are worth more.
3. Warranty May Run Out Before Your Loan Payment Schedule
The average car loan length is over five years these days. Meanwhile, the factory warranty on a new car is typically three years. That means, for the average new car buyer, their warranty will be long gone when they still have years of payments left.
Financing a new car can be viewed as a poor investment because of depreciation. New cars depreciate around 10% the second they are driven off the dealership lot, and that figure climbs to around 20% in the first year. After a full five years, you’re looking at a 55% value loss on average, according to Edmunds. Some people view this as the equivalent of flushing money down the drain, but for those who plan on driving their vehicle until the wheels fall off, it matters less.
For those looking for the best value, a good rule of thumb is to look at vehicles that are around three or four years old. They should still have low miles, feel relatively new, and have already suffered the greatest depreciation drop.
Whether a new car or a used car is what you have your eye on, credit problems can make it more difficult to get approved for financing. Luckily, We can assist car buyers dealing with credit issues. Learn what we can do for you by filling out our free, simple and secure online application today.